Overview of Private Equity in Hong Kong

Before you try to get into the Private equity market of Hong Kong or know about the recruitment process, it’s important that you have an idea about the market. Here’s a snapshot of Hong Kong’s Private Equity market –

As you already know that Hong Kong is the second largest PE market in Asia – it has captured 19% of the total capital pool of Asia. So, your chances in growing your career in Hong Kong are very much possible. Moreover, as we know that there are three regions that are most popular for private equity – New York, London, and Hong Kong.

According to last data gathered in 2014, it has been found that there are 400 private equity firms in Hong Kong. If you’re willing to test the waters and do the networking, why won’t you get a chance in one of the top private equity firms in Hong Kong?

According to the Hong Kong Venture Capital and Private Equity Association (HKVCA), at the end of the year 2014, the total capital under management in the Private Equity market in Hong Kong was US $110 billion. Plus, in 2014, the total capital under management had increased 12% compared to the last year’s total capital commitment.

Even if Hong Kong is a great place to work in private equity, Hong Kong’s most private equity funds come from abroad. After all who wouldn’t want to invest in Hong Kong? These investments come from all over the world – Australia, India, Singapore, Japan, and even Korea.

During 2009 to 2015, Hong Kong has become one of the top 3 in IPO fund-raising ranking. That means you can understand that in exit private equity investments Hong Kong has been doing exceedingly well for the last 7 years.

In the first eleven months of 2014, private equity and venture capital deals amounted to US $407 million (the numbers of PE deals were 37 in total) and private investment in public equity (PIPE) was US $5.675 billion.

Venture Capital: Hong Kong’s private equity firms invest a lot in venture capital. These firms concentrate on the small, start-up and emerging firms which need funds for their growth. Before investing the Private Equity firms in Hong Kong check their potentiality and if they have the growth potential, they decide to invest into these companies. Venture capital investment is one of the big investments of private equity firms in Hong Kong.

Leveraged buyout: This is another investment services offered by private equity firms in Hong Kong. In leveraged buyout they choose the firm which has a strong management team. And then they see whether there is any chance of buying the controlling shares through management. If yes, they go for leveraged buyout and offer the management the controlling share. And when the firm grows in profits and revenue, the private equity firms earn attractive returns. Whenever the returns don’t seem to be attractive, then they look for exit strategies.

Growth capital:Growth capital is another private equity investment which is very much prevalent in Hong Kong. Private equity firms look for companies which are mature enough and then do their due diligence to see whether the private equity firms can generate attractive returns or not. If they can see the green lights, they go ahead and invest their money to expand or restructure operations, help the company create a new product or enter a new market or assist the company in acquiring another company to create synergy and growth.

Distressed Investment: Hong Kong’s private equity firms also look for distressed investments where corporate bonds or common and preferred stocks are in some sort of distress. And then after doing their own research they decide to buy those bonds/stocks in cheap price and sell off afterwards.

List of Top Private Equity Firms in Hong Kong

According to Hong Kong Venture Capital and Private Equity Association (HKVCA), here is the list of some top private equity firms in Hong Kong –

The Abraaj Group

ACA Capital Group Limited

ACE & Company Hong Kong Limited

Actis

Affinity Equity Partners Limited

AGIC Capital

All-Stars Investment Limited

Allstate Investments

Blue Ocean Capital Advisors Limited

BVCF Management Ltd.

Goldman Sachs

Hippocorn Capital

HNA Group (International) Company Limited

Ion Pacific Limited

Latitude Capital Management

MizMaa

Queen’s Road Capital

responsAbility Hong Kong Ltd.

Sun Hung Kai Strategic Capital Limited

SA Capital Limited

Sectoral Asset Management Limited

Sequoia Capital China Advisors Limited

Silverhorn Investment Advisors Ltd.

Streeton Partners

Sun Hung Kai Strategic Capital Limited

Tiger Securities Asset Management Company Limited

Recruitment Process

Even if Private Equity in Hong Kong market seems interesting to work for, it’s not easy to break into Private Equity. The first reason is Hong Kong Private Equity market is much smaller in size (even if it has over 400 PE firms). And without PE experience, you will have limited opportunities. So, here’s an overview of the recruitment process of Private Equity in Hong Kong –

Pre-requisites/Eligibility: Hong Kong Private Equity firms need candidates to be more than just gamut of banking experiences and finance degrees. They want them to pursue something else as well. So since the beginning be aware that you also need to showcase your extra-curricular activities or knowledge in arts or history. Of course, extensive knowledge in finance is necessary and you also need to do relevant internships to make your mark, but becoming more than just an aspirant of PE career is important too. And if you can remember that, you would be ready for the challenge and the struggle.

Networking: To get an internship opportunity is pretty difficult in Private Equity in Hong Kong. That’s why you need to constantly be in a lookout for opportunity. And your tool is networking. You need to do networking intensively. If you don’t then your chances would be very bleak. First, try asking your professors in your school and ask them whether they know anyone who has been in PE market. They can give you some leads. You can also peep through your alumni network and then try to connect people who are directly working in Private Equity market in Hong Kong. And you can take it to the next level too. You can connect with strangers in Linked-In who have been working in Hong Kong’s Private Equity market. But no matter what you do, you need to stay in Hong Kong to get results. You can’t stay elsewhere and expect the results from networking. No. Find a friend with whom you can stay in Hong Kong. Or find yourself a hostel or a cheap hotel.

Internships: As you know that the competition is fierce in Hong Kong’s Private Equity market, you shouldn’t leave any stone unturned. You need to try to get at least 2 internships before you expect to get into a full-time opportunity. Try out in PE internships. If you don’t get any PE internship, you can go for investment banking internships at least. By doing internships you need to prove to the employers that you’re very much committed to your future career and you know what you’re doing.

Interviews: For interview for Private Equity in Hong Kong, you need to prepare yourself thoroughly. For example, you need to come from a good school, plus you also need to do couple of internships (more is always better), and you also need to make sure that you’re prepared enough technically to answer questions. Before you do anything, concentrate on making your CV top-notch. Include all your experience, your skills, and relevant education. And the CV should be only of one-two pages. Once your CV is done, prepare your cover letter and tell your story in brief manner. Then go for the interview. The interview in Hong Kong is unstructured and you may need to go through 2 rounds of interview or 15. And it all depends upon on the particular private equity firm to decide upon which structure they would follow. First there would be “fit” interview where you will be judged on the basis of whether you’re culturally fit for the organization or not. Then you will be asked technical questions to see your depth in accounting, valuation, and financial modeling. Finally, you will be asked personality type questions to judge your interpersonal skills.

Language & Entry Barrier: You must know Mandarin. Plus you also need to know English pretty well to handle cross-border deals. You will be facing a lot of issue if you’re not fluent in both of these languages. As a foreigner your chances of success will increase if you decide to stay in Hong Kong instead of trying from abroad for full-time/internship opportunity.

Culture

If you think that Hong Kong is not a good place to hang out, think again. After the US and the UK, Hong Kong is the hub of private equity. And all aspirants who want to build their career in private equity would like to come to Hong Kong to pursue their career. As a result, you will get a lot of opportunity to meet new people and to hang out and network with them.

And people in leadership positions like MDs, VPs, Directors, and Partners all visit the similar places. So if you can locate anyone, go over and connect with them. Tell your story and learn from them. Ask for any suggestion and add value. It will open floodgates of opportunities for you.

Hong Kong is a place where the working hours are almost similar like New York and London. But you don’t need to be on your toes for finding investments. There would be many investments which are in the pipeline; however, as private equity professional you will do less financial modeling and will need to do a lot of administrative work and cold calling.

Salaries in Private Equity in Hong Kong

From the salaries perspective also, Hong Kong is very attractive. Have a glance at the following screenshot and you will have an idea about why so many aspirants want to pursue their career in private equity in Hong Kong –

If you look at the figure, you would see that you will start out a little low, but as the years go by and you get promoted to a higher rung, you earn a lot more. And there are two categories – investor relations and investor analyst. In investment analyst category, you earn much more than investors relations category. If money is you’re after, investment analyst role would be right for you.

Here one more thing you should know. Hong Kong’s tax rate is much lesser than any other countries. That means you will get to have almost everything you would earn which is not a bad idea for a starter.

Exit Opportunities

Normally people don’t leave private equity firms in Hong Kong as the pay is quite good in the higher rung. But if you want to leave private equity anyway, here’re three options you have –

You can leave and try out your luck in investment banking (though the things wouldn’t be pretty easy for you, but your private equity experience will certainly help).

You can take internal transfer and go back to your country (if you’re a foreigner).

You can leave the job and start your own business.

Conclusion

In Hong Kong, Private Equity market is quite good, but the job market isn’t that attractive. You need to be top-notch to be able to get access to the top private equity firms in Hong Kong. But if you can get an opportunity in Hong Kong and you can stick to it for few years, your future would be magnificent.

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